July 13, 2012
NASDAQ to Promote Sustainability Disclosure
by Robert Kropp

At Rio+20, the US-based stock exchange joins four counterparts in encouraging corporations to
disclose environmental, social, and governance risks and opportunities.

It may indeed by the case that too little of a legally binding nature was agreed upon at last
month's Rio+20 conference
on sustainable development. But it may also be true that the proliferation of outside voices
calling for meaningful action indicates that sustainability has become a core value for many.

One accomplishment reached at the conference was an agreement by five members of the Sustainable Stock Exchanges (SSE)
initiative to promote reporting on environmental, social, and corporate governance (ESG) risks and
opportunities by listed companies.

The Johannesburg Stock Exchange (JSE), one of the exchanges involved
in the agreement, already requires its more than 450 companies to produce integrated reports, which
combine financial data with reporting on ESG issues. Another, the Brazilian BM&FBOVESPA, adopted a comply-or-explain policy earlier
this year, recommending that its listed companies either state that they publish a regular
sustainability report and where it can be accessed, or explain why they do not do so.

Of
particular interest to US-based investors is the involvement of the NASDAQ OMX in the agreement. Sandy Frucher, the exchange's
Vice-Chairman, stated it would "work together with the other founding signatories…through the World Federation of Exchanges (WFE) to
encourage all exchanges to sign up to the new SSE commitment."

However, corporate
reporting remains an voluntary initiative in the US, despite the recommendations of its major stock
exchanges. As a spokesperson for the New York Stock Exchange told Bloomberg, "We don't have any mandates for our listed companies in terms of
sustainability reporting. We don't have a position on that."

And while the commitment by
the exchanges was welcomed by institutional investors—Steve Waygood of the UK-based Aviva Investors stated, "For some years
we have made it clear that Aviva Investors would prefer to trade on exchanges that embed better ESG
disclosure in their listing rules"—Mindy Lubber of Ce
res noted that the agreement "stopped short of embracing disclosure as listing requirement."

On the other hand, Lubber wrote, "Major institutional investors are integrating
sustainability considerations into their investment decisions, especially evaluation of risk and
long-term value creation of stronger sustainability performance."

"Some of the momentum we
are seeing in Rio is clearly the result of a push by networks of institutional investors for
stronger disclosure," she continued.

The other signatories to the commitment to promote
sustainability are the Istanbul Stock Exchange and the Egyptian Exchange.